W o r k i n g h a r d f o r i n d i a n a

hoosier Lottery • annuaL report 2009

Since inception, the Hoosier Lottery has consistently generated significant dollars

for the state of indiana. We began selling

lottery games in october 1989, after a majority

of indiana citizens voted yes on a 1988 voter

referendum. the $6 million in start up funding

the state provided was repaid in less than a year.

our 187 employees throughout the state labor

each year to deliver fun and entertaining lottery

games via our nearly 4,000 retail partners. the

fruit of that labor, our net income, is transferred

to the office of the state treasurer. in fiscal year

2009, that amounted to $179 million. how much

money has the hoosier Lottery produced for

the state of indiana in its 20 years of operation?

More than $3.4 billion!

in addition to generating much needed revenue

for the state of indiana, this year we also awarded

hundreds of millions of dollars in cash prizes

to players and remitted millions of dollars in

commissions to indiana businesses who sell

our product.

the indiana general assembly directs the

allocation of all net income generated by the

hoosier Lottery. these monies have continuously

been directed to the Build indiana fund, the

indiana state teachers’ retirement fund and

the police officers’ and firefighters’ pension and

disability fund. Most recently, the Build indiana

fund has been allocating the hoosier Lottery

revenue to significantly reduce the motor vehicle

excise taxes paid by hoosier residents.

o u r M i s s i o n

To responsibly provide innovative

and entertaining lottery games for

the benefit of the citizens of Indiana

// a b o u t u s

C o r e Va L u e s

in all we do, we will:

• • •

Be customer-centric

and consumer-centric.

• • •

have a passion for excellence.

• • •

foster creativity, teamwork,

and collaboration.

• • •

operate with the highest level

of integrity.

• • •

Commit to the growth and

development of our team.

State Lottery Commissionof Indiana

Todd A. Etzler Valparaiso, in

• • •

Gregory M. Fitzloff georgetown, in

• • •

Todd Stuartindianapolis, in

A message from the Chairperson

delivering the most revenue to the citizens of the state of

indiana is the primary goal of the hoosier Lottery. this past

year, the Lottery staff accomplished just that while working

through some of the most difficult economic challenges and

circumstances in memory.

under the capable leadership of executive director,

kathryn a. densborn, the hoosier Lottery executive team

conducted the business of this quasi state agency with the

utmost efficiency and integrity. the competence of this

organization is evident in the results they produce as they

confidently guide their talented and creative staff.

keeping the player experience fresh and compelling by

engaging them with innovative and entertaining games

has ensured the future endurance of lottery revenues. the

launch of a new draw product along with the introduction of

novel ways to play scratch-off products helped to keep Lottery

revenues robust in fiscal year 2009.

the commitment and dedication of the hoosier Lottery team

is without reproach as they unreservedly work to generate

higher revenues to benefit the citizens of indiana. i am secure

in knowing that this success will continue well into the future.

i am proud to offer you the hoosier Lottery’s annual report

for fiscal year 2009.

Jean Northenor, ChairpersonWarsaw, in

f r o m t h e L o t t e r y C o m m i s s i o n //

Kathryn A. Densborn Executive Director

Hoosier Lottery

A note from the Executive Director While weathering

one of the toughest economic declines in decades, this past year we

were able to successfully launch a new draw game, introduce a new

style of play for scratch-offs, and achieve measurable sales growth from

powerball® during periods of smaller jackpots by consistently messaging

a simple reminder to play. Most importantly, we were able to deliver

$179 million to the state of indiana on sales of $732 million.

a second quarter decline in sales made fiscal year 2009 a year of analysis and

learning, of challenges and accomplishments and one of belt tightening and

tough decisions. spending time in the field with our regional management

teams, visiting retailers, and riding along with our Lottery sales representatives

has provided insight into daily responsibilities with the goal of more efficiently

accommodating the needs of our staff, our retailers and our players. there is

much regional diversity in our great state, and not surprisingly, that translates

into different purchasing patterns. utilizing the knowledge of this data to

determine the optimum product mix for our retail partners is challenging, but

the reward is increased sales growth and profit.

appealing and innovative games helped to engage our players as we

endeavored to keep our offerings current and compelling. Quick draw,

our newest draw game was launched a month ahead of schedule and with

considerably superior results than were initially forecast. double play®,

an innovative new product that contains a scratch-off game on one side with

a pull-tab game on the other side, sold out in two weeks! and indiana is

still the state with the greatest number of powerball® jackpot winners at 36,

with the addition of an indianapolis winner in november and a Lawrenceburg

winner in January.

exciting sponsorship events allowed us to engage and connect with our

existing players and reach out to new players. a crowd of hearty

spectators and a host of media braved the cold in the early morning hour

to watch as i assisted in pouring green dye into the canal that turned all

of indianapolis irish on st. patrick’s day. While we were center stage in

indianapolis distributing promotional coupons for our new Quick draw

game during the st. patrick’s day parade, our sales staff was “putting on

the green” and also distributing coupons to players statewide as they called

on their retail customers. the hoosier Lottery set sales records at the

indiana state fair, and one exceptional winner was awarded $1,000,000

in a special, one-time return of the hoosier Millionaire show staged at the

hoosier Lottery grandstand. our sponsorship presence at multiple sporting

events and philanthropic events throughout the state has not only proven

effective and inspiring, but also f-u-n.

the support of our Commissioners and the commitment of our staff have

allowed these achievements in spite of the current economic challenges. the

hoosier Lottery is privileged to have a talented and dedicated group of

individuals who give their all to make sure we provide the best possible

products and services to our retailers and our players. i continue to

have pride in the work we do on behalf of the state of indiana and the

money we provide to its citizens.

i invite you to take a look at the accomplishments that are outlined

on the pages that follow and know that the hoosier Lottery is

committed to operating with the highest integrity and security.

// f r o m t h e e x e c u t i v e d i r e c t o r

in fiscal year 2009, hoosiers continued to play their favorite hoosier Lottery

draw games, powerball® with power play® and hoosier Lotto, as well as a

wide variety of scratch-offs. in fact, 59% of hoosiers 18 and older played

at least one hoosier Lottery game1. this was also a year for players trying

new products, with the launch of a new draw game, Quick draw, and a

new double play® instant ticket that combined both a scratch-off and a

pull-tab game on the same ticket. With total sales of over $732 million,

$453 million in prizes awarded to players, commissions paid to indiana businesses

totaling $50 million and a net income of $179 million in fiscal year 2009, the

hoosier Lottery continues to make a meaningful contribution to the

economic landscape of the state of indiana.

The power of Powerball® with Power Play®

in its 17th year, powerball continues

to be played by more hoosiers than

any other hoosier Lottery product.

an amazing 44% of all hoosiers

18 and older experienced the power of powerball, clearly confirming the

strength of this brand1. Changes to the game matrix in January yielded a

larger starting jackpot, better overall odds and an improved power play

feature. this change, a promotional push for power play in september,

and an ongoing messaging campaign helped to keep sales strong.

in addition to generating Lottery sales and traffic count for our retailers,

this big jackpot game yielded more than 2.7 million winning tickets all

across indiana in 2009. We had seven $1 million winners and 17 winners of

$200,000. We were also lucky enough to add two more jackpot wins to our

count. incredibly, the hoosier Lottery continues to hold the record for the

most powerball jackpot wins of any participating state or jurisdiction.

Hoosier Lotto – a temperamental teen at 15 years of age but still the Hometown favorite

after an extraordinarily long run in 2008 when no jackpot

prizes were won, we surprisingly experienced quite the

opposite in 2009, and awarded 11 jackpot prizes. in addition

to jackpots, this hometown favorite yielded a total of over

9.7 million winning tickets at all prize levels and $55 million in sales. no

wonder nearly 37% of all hoosiers 18 and older have purchased our state

jackpot game1.

Quick Draw a quick successthe launch of Quick draw in March proved to be

one of our most successful draw game product

launches. players loved the easy-to-play aspects

of this game.

42 Zimmer, Inc. Employees • Warsaw • $200,000

M o r e g a m e s ; l o t s o f p o s s i b i l i t i e s //

Net Sales by Game (Millions of Dollars) FY09

scratch-offs $474

pull-tab 11

powerball 114

hoosier Lotto 55

Quick draw 7

Mix & Match 8

daily 3/daily 4 57

Lucky 5 6

total $732

44% of Hoosiers 18 and older played

Powerball1

“I have been playing your new game. I love it!”

Rosaline Lee, Marion

// M o r e g a m e s ; l o t s o f p o s s i b i l i t i e s

Double Play® - you’re gonna flip!scratch-offs continue to be our

biggest product category, with sales of

$474 million. in 2009, not only did

we launch a variety of new games,

we also introduced a new style of play. double play

featured scratch-off play on the front and a pull-tab play

on the back. double play, along with our other scratch-offs, produced

38 million winning tickets across indiana.

Lucky 5 awards 30 top prizesthis easy to play little lotto game, with a not-so-little top

prize of $50,000, has a small but loyal fan base among

hoosier Lottery players. in 2009, this game delivered big

for our players with 30 top prize winning tickets and over

51,000 winning tickets in all.

Connecting with our players through our sponsorships

sponsorships and events give us an opportunity

to reach out and connect with our players. We

kicked off the year at the indiana state fair.

We achieved record sales and were thrilled

to give away $1,000,000 during a one time

re-staging of the hoosier Millionaire show. We continued to strengthen our

partnership with the indianapolis Colts, one of the strongest nfL brands

in the country. the opening of Lucas oil stadium brought heightened

awareness and excitement for the Colts and their sponsors. our first time

working with susan g. komen race for the Cure statewide proved to be

an incredibly rewarding and productive experience on many levels. We

once again made st. patrick’s day a hoosier Lottery day as we sponsored

the greening of the canal and participated in the parade. rounding out

our sponsorship line-up, we reached thousands of players and fans

through our participation with Circle City Classic, the indiana pacers, the

gary railCats, the south Bend silver hawks, the evansville otters, the

fort Wayne Wizards and the indianapolis indians.

Security and integrity remain at the top of the listas always, we sought to achieve profitable growth while maintaining

the security and integrity of our data and our games. our security and

information technology departments are integral to the execution of a

game launch, a game change and our promotional drawings in addition

to their daily responsibilities that keep our system running 24-7.

Lotto Town is a destination for Indiana State Fair atte

ndees

Hoosier Lottery celebrated luck at the St. Patrick’s Day Para

de

42 Zimmer, Inc. Employees • Warsaw • $200,000

1Play Last Year. Customer Purchase Behavior, Marz and Company, June 2009

Powerball® and Power Play®

are registered trademarks of The Multi-State Lottery Association

Double Play® is a Fusion™ product of Pollard Banknote, U.S. Patent No. 6,347,794

Nearly 4 ,000 Hoosier Lottery retai lers can be found

throughout the State of Indiana. We work to make our products

accessible and convenient for our players. Most of our players

can count on finding the products they love in the stores they

regularly visit.

We support our retailers by providing merchandising solutions,

promotional offerings, training and regular visits from

Hoosier Lottery Sales Representatives.

Hoosier Lottery Sales Representative Sybil Kay and Suresh “Sonny” Kheradiya • In

diana

polis

Charli Verba with Kathryn A. Densborn • Lawrenceburg

h o o s i e r L o t t e r y r e t a i l e r s ; a w i n n i n g p a r t n e r s h i p f o r i n d i a n a //

retailers are compensated by:

• earning a base commission as a percentage of sales

• redeeming winning tickets and awarding prizes to players

• selling the jackpot or top prize for specific games:

• powerball®

• hoosier Lotto

• Quick draw

• Mix & Match

• Maximizing the retailer rewards program which provides

incentives for reaching sales growth goals and implementing

business practices designed to profitably increase sales.

FPO

Clearly, Hoosier Lottery retailers help us help Indiana.

In return, the Hoosier Lottery paid more than

$50 million in commissions to our retailers this past

year, not to mention generating foot traffic in their

stores and the add-on sales resulting from that

traffic1. It truly is a winning partnership.1Hoosier Lottery - Shopper Marketing - C-store Intercept Study Winter 2007-2008

Hoosier Lottery retailers are vital to the effective

selling of our games to Hoosier citizens and to

those visiting our state. By helping to responsibly

maximize Hoosier Lottery sales for the benefit of

the citizens of Indiana, our retailers also benefit

their bottom line.

// h o o s i e r L o t t e r y r e t a i l e r s ; a w i n n i n g p a r t n e r s h i p f o r i n d i a n a

Jeff Gerbert, Matt Brumbagh and Joe Doust with Kathryn A. Densborn •

New

Have

n

Don and Jim Rihm with Kathryn A. Densborn • Cambridge C

ity

$50Mto IndianaRetailers

W i n n e r s e v e r y w h e r e , e v e r y d a y //

The Hoosier Lottery a w a r d e d a m a z i n g amounts of money to winners from all across Indiana as well as the United States. Our products delivered more than 45 million winning tickets in fiscal year 2009.

Gary and Belinda Rasche • Jasper • $1,000,000

Robert Doane • LaPorte • $1,000,000

Robert Gladstein • Monrovia • $100,000

Caroline Clark • Lafayette • $100,000

100 - 999 winning tickets10 - 99 winning tickets1 - 9 winning ticket(s)

// W i n n e r s e v e r y w h e r e , e v e r y d a y

This year 24 players

were awarded prizes of

$1 million or more.

Shantay Britman • Elkhart • $6,500,000

Bobby Guffey • Roanoke • $3,000,000

Pamela Smith • Summitville • $2,500,000

Kimberly Vanulzen • Greenwood • $1,000,000

100 - 999 winning tickets10 - 99 winning tickets1 - 9 winning ticket(s)

Winning tickets of $600 or more by zip code in fiscal year 2009

d e l i v e r i n g o n o u r m i s s i o n //

Allocation ofnet income in

fiscal year 2009

$119M to the Build indiana fund

$30M to the indiana state teachers’ retirement fund

$30M to the police officers’ and firefighters’ pension

and disability fund

A $3.4 billion return on an initial $6 million investment it all started when the indiana general assembly passed the state

budget with an appropriation of $6 million to establish a state

lottery. once the hoosier Lottery began selling tickets, this initial

investment was quickly repaid. including fiscal year 2009 net income of

$179 million, a total of $3.4 billion has been transferred to the state.

Hoosier Lottery funds reduce motor vehicle excise tax approximately $119 million of hoosier Lottery funds were directed

to the Build indiana fund which is utilized to significantly reduce

motor vehicle excise taxes for hoosier citizens.

Hoosier Lottery funds benefit Indiana’s bestthis year, as in years past, the indiana general assembly directed

$30 million of hoosier Lottery net income to the indiana state

teachers’ retirement fund and $30 million to the police officers’

and firefighters’ pension and disability fund. since 1989, the

hoosier Lottery has contributed a total of over $977 million to

these two important funds.

While awarding $453 million in prize money throughout the year is

rewarding, it is the money we turn over to the state that demonstrates

how effectively we are executing our mission.

// d e l i v e r i n g o n o u r m i s s i o n

$179 million in fiscal 2009,

$3.4 billion since 1989

f i n a n c i a l s //

THE STATE LOTTERY COMMISSION OF INDIANASTATEMENTS OF NET ASSETSAS OF JUNE 30, 2009 AND 2008

2009 2008ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 61,393,152 $ 68,074,259 Investments — current portion 10,229,452 8,585,823 Accounts receivable — net 24,472,828 32,423,283 Prepaid expenses 3,531,634 5,215,736 Accrued interest receivable 111,805 715,041 Ticket inventory 402,312 229,937

Total current assets 100,141,183 115,244,079

NONCURRENT ASSETS: Long-term investments — less current portion 102,347,244 82,146,691

Restricted assets 8,052,769 8,074,698 Capital assets — net 2,209,034 3,736,960

Total noncurrent assets 112,609,047 93,958,349

TOTAL $ 212,750,230 $ 209,202,428

LIABILITIES AND NET ASSETS

CURRENT LIABILITIES: Accounts payable: State $ 46,832,296 $ 51,340,603 Trade 5,531,900 6,718,479 Current portion of prize liability 52,175,090 62,584,910 Deferred revenue 920,488 783,615 Other accrued expenses 1,439,658 2,145,033

Total current liabilities 106,899,432 123,572,640

LONG-TERM LIABILITIES — Prize liability less current portion 100,850,798 80,629,788

Total liabilities 207,750,230 204,202,428

NET ASSETS: Unrestricted 2,790,966 1,263,040 Invested in capital assets 2,209,034 3,736,960

Total net assets 5,000,000 5,000,000

TOTAL $ 212,750,230 $ 209,202,428

THE STATE LOTTERY COMMISSION OF INDIANASTATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETSFOR THE YEARS ENDED JUNE 30, 2009 AND 2008

2009 2008OPERATING REVENUES: Instant ticket sales — net $ 484,630,385 $ 539,321,205 On-line ticket sales 248,026,485 283,523,946

Total operating revenues 732,656,870 822,845,151

OPERATING EXPENSES: Direct game expenses: Instant game prizes 326,291,712 360,763,282 On-line games prizes 126,933,453 142,531,880

453,225,165 503,295,162 Indirect game expenses: Retailer commissions 50,499,632 59,499,591 Ticket printing costs 7,424,945 8,620,546 Advertising and promotion 11,252,281 9,837,030 On-line professional services 7,195,740 8,358,404 ITVM lease and courier services 3,740,932 3,662,997

80,113,530 89,978,568 Total game expenses 533,338,695 593,273,730

OTHER OPERATING EXPENSES: Salaries, wages, and benefits 13,879,830 14,589,704 General and administrative 7,409,111 5,000,032

Total other operating expenses 21,288,941 19,589,736

Total operating expenses 554,627,636 612,863,466

OPERATING INCOME 178,029,234 209,981,685

NON-OPERATING REVENUES: Interest income 635,959 3,910,889 Net increase in fair value of investments 21,611 2,944,523 Other income - net 247,517 230,062

Total non-operating revenues -net 905,087 7,085,474

NET INCOME PRIOR TO DISTRIBUTIONS 178,934,321 217,067,159

DISTRIBUTIONS: Distributions to the State (132,102,025) (165,726,556) Distributions to be paid to the State (46,832,296) (51,340,603)

Total distributions (178,934,321) (217,067,159)

CHANGE IN NET ASSETS - -

NET ASSETS — Beginning of year 5,000,000 5,000,000

NET ASSETS — Ending of year $ 5,000,000 $ 5,000,000

// f i n a n c i a l s

THE STATE LOTTERY COMMISSION OF INDIANASTATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETSFOR THE YEARS ENDED JUNE 30, 2009 AND 2008

2009 2008OPERATING REVENUES: Instant ticket sales — net $ 484,630,385 $ 539,321,205 On-line ticket sales 248,026,485 283,523,946

Total operating revenues 732,656,870 822,845,151

OPERATING EXPENSES: Direct game expenses: Instant game prizes 326,291,712 360,763,282 On-line games prizes 126,933,453 142,531,880

453,225,165 503,295,162 Indirect game expenses: Retailer commissions 50,499,632 59,499,591 Ticket printing costs 7,424,945 8,620,546 Advertising and promotion 11,252,281 9,837,030 On-line professional services 7,195,740 8,358,404 ITVM lease and courier services 3,740,932 3,662,997

80,113,530 89,978,568 Total game expenses 533,338,695 593,273,730

OTHER OPERATING EXPENSES: Salaries, wages, and benefits 13,879,830 14,589,704 General and administrative 7,409,111 5,000,032

Total other operating expenses 21,288,941 19,589,736

Total operating expenses 554,627,636 612,863,466

OPERATING INCOME 178,029,234 209,981,685

NON-OPERATING REVENUES: Interest income 635,959 3,910,889 Net increase in fair value of investments 21,611 2,944,523 Other income - net 247,517 230,062

Total non-operating revenues -net 905,087 7,085,474

NET INCOME PRIOR TO DISTRIBUTIONS 178,934,321 217,067,159

DISTRIBUTIONS: Distributions to the State (132,102,025) (165,726,556) Distributions to be paid to the State (46,832,296) (51,340,603)

Total distributions (178,934,321) (217,067,159)

CHANGE IN NET ASSETS - -

NET ASSETS — Beginning of year 5,000,000 5,000,000

NET ASSETS — Ending of year $ 5,000,000 $ 5,000,000

THE STATE LOTTERY COMMISSION OF INDIANASTATEMENTS OF CASH FLOWSFOR THE YEARS ENDED JUNE 30, 2009 AND 2008

2009 2008CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from ticket sales $ 740,669,757 $ 822,069,641 Payments to ticket winners (443,413,975) (507,992,032) Payments to employees (14,585,205) (14,244,233) Payments of suppliers (85,048,777) (95,177,329)

Net cash provided by operating activities 197,621,800 204,656,047

CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: Distributions to the State (183,442,628) (224,030,122) Other income 247,517 230,062 Net increase (decrease) in restricted assets 21,929 (61,436)

Net cash used in noncapital and related financing activities (183,173,182) (223,861,496)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Purchase of capital assets (627,311) (3,713,319) Proceeds from the sale of capital assets 80,962 39,356

Net cash used in capital and related financing activities (546,349) (3,673,963)

CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments (25,943,583) (9,551,318) Investment maturities 4,121,012 3,939,939 Interest income 1,239,195 3,730,451

Net cash used in investing activities (20,583,376) (1,880,928)

NET DECREASE IN CASH AND CASH EQUIVALENTS (6,681,107) (24,760,340)

CASH AND CASH EQUIVALENTS — Beginning of year 68,074,259 92,834,599

CASH AND CASH EQUIVALENTS — End of year $ 61,393,152 $ 68,074,259

RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating income $ 178,029,234 $ 209,981,685 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 2,148,717 2,065,701 Change in provision for doubtful accounts 22,711 27,577 Change in provision for ticket returns (161,447) 994,710 Loss (gain) on sale of fixed assets (74,442) 30,565 Changes in certain assets and liabilities: Accounts receivable 8,089,191 (2,173,671) Instant ticket inventory (172,375) (134,224) Prepaid expenses 1,684,102 170,663 Accounts payable — trade (1,186,579) (2,300,869) Deferred revenue 136,873 345,309 Other accrued expenses (705,375) 345,471 Prize liability 9,811,190 (4,696,870)

Net cash provided by operating activities $ 197,621,800 $ 204,656,047

SCHEDULE OF NONCASH INVESTING, CAPITAL, AND RELATED FINANCING ACTIVITIES — Net increase in fair value of investments $ 21,611 $ 2,944,523

for more information contact Customer service at (317) 264-4800 or 1-800-955-6886.

State Lottery executive Staff

Kathryn a. Densborn

ExEcutivE DirEctor

W. eDWarD benton

DEputy DirEctor anD chiEf financial officEr

susan GoliGhtly DirEctor of MarkEting

Jeff Goltz DirEctor of inforMation tEchnology

anDreW Jones inforMation SEcurity officEr

anDreW J. KlinGer gEnEral counSEl

tim Kuehr

controllEr

irene lanGe

DirEctor of aDMiniStration

Jim nash

DirEctor of SEcurity

anDreW reeD DirEctor of public rElationS

Carrie strouD intErnal auDitor

marK thaCKer

DirEctor of SalES

HooSier Lottery office LocationS

heaDquarters

pan aM plaza, SuitE 1100201 S. capitol avE.inDianapoliS, in 46225

Central reGion

5252 DEcatur blvD.inDianapoliS, in 46241

northWestern reGion

1344 broaDway

gary, in 46407 1539 n. ironwooD Dr.South bEnD, in 46635

northeastern reGion

3711 vanguarD Dr., SuitE ifort waynE, in 46809

southern reGion

watEr towEr SquarE - SuitE 104590 MiSSouri avE.JEffErSonvillE, in 47130 5625 E. virginia St.EvanSvillE, in 47715

Western reGion

680 E. Springhill Dr. tErrE hautE, in 47802